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Japan export curbs on South Korea may widen rift over wartime labour compensation

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07/12/2019 | 05:14am EDT
Police officer stands guard near Japan and South Korea national flags at hotel, where South Korean embassy in Japan is holding the reception to mark the 50th anniversary of normalisation of ties between Seoul and Tokyo in Tokyo

TOKYO (Reuters) - Japan's restrictions on certain tech exports to South Korea are deepening a decades-long feud over wartime forced labour and may make compromise harder as leaders in both countries appeal to their political bases.

Japan's tighter export restrictions on three materials crucial for smartphone displays and microchips could hit tech giants, such as Samsung Electronics Co Ltd and SK Hynix Inc, that supply chips to the likes of Apple Inc and Huawei Technologies Co Ltd. They also underscore Japan's grip on a key link in the global supply chain.

Polling data on Friday showed 61% of South Koreans blamed the Japanese government for the current row and 67% were willing to boycott Japanese products.

"If Japan was trying to give South Korea a shock and force it to compromise, that was a mistake," said Masao Okonogi, a professor emeritus at Tokyo's Keio University, adding that growing anti-Japanese sentiment in South Korea could make it harder for President Moon Jae-in to seek a solution.

"This is becoming a crisis of the 1965 system," he said, referring to the year the two countries normalised diplomatic ties.

A Japanese foreign ministry official, speaking on condition of anonymity, told reporters on Friday that tighter export curbs were not intended as retaliation over the wartime workers dispute.

But Japan's trade minister, Hiroshige Seko, mentioned the wartime labour dispute as a cause of mistrust when he announced the curbs, and sources familiar with the Japanese government's position said the two issues were closely entangled.

"We want the Korean side to understand the scale of the anger on our side," one such source said. All of the sources familiar with the government's position did not wish to be identified because of the sensitivity of the matter.

Japan's export curbs came just ahead of a July 21 upper-house election that Abe needs to win big to keep alive his hopes of revising the pacifist constitution.

Abe's ruling bloc is on track to win a solid majority, media surveys show, but must have a two-thirds "super majority," including like-minded allies, to approve constitutional revisions.

A survey by the Japan News Network (JNN) released this week showed that 58% of voters backed the export curbs, compared with 24% who were opposed. But the top issues in the election are worries about the country's pension system and a sales tax increase.


Relations between Washington's two biggest Asian allies have long been plagued by memories of Japan's 1910-45 colonisation of the peninsula and the war. Particularly thorny is the matter of "comfort women," a euphemism for girls and women forced to work in Japanese wartime military brothels.

Many Japanese resent being urged to atone for misdeeds more than seven decades old, while many in South Korea doubt the sincerity of Tokyo's apologies.

The dispute worsened last year when South Korean courts ordered Japanese companies to compensate former conscripted labourers.

Japan says that the matter was settled by the 1965 treaty and that by demanding compensation, Seoul is violating international law.

Abe appears to be playing to his conservative base, and Moon's need to court his own supporters means he is unlikely to back down, the experts said.

"Let's not forget that Moon is a populist leader ... A populist leader cannot afford to be humiliated and forced to change course," said Andrew Horvat, a visiting professor at Japan's Hosai International University.

For both Moon and Abe, Horvat added, resolving the dispute "would make them statesmen but it might not win the next election."

A Gallup poll released on Friday showed a slight dip in Moon's approval rating alongside strong public support for the South Korean position.

Complicating matters are media reports that hydrogen fluoride, one of the materials covered by the export curbs, was shipped to North Korea after being exported to the South. Hydrogen fluoride can be used in chemical weapons.

Seoul has angrily denounced the reports as groundless and on Friday called for an international investigation.

Japanese government officials have declined to comment, saying only there were "inappropriate instances" of South Korea's export controls.

Officials from the two sides were meeting in Tokyo on Friday, but Japan has said it was not thinking of withdrawing the curbs.

Japan might soften its tone slightly after the election, but is unlikely to remove the restrictions soon, a former senior Japanese diplomat said, adding that Abe has not faced major domestic criticism for his tough stance.

"They can meet many times, but I don't think a mutually acceptable solution will be found," said the ex-diplomat, who declined to be identified because of the sensitivity of the matter.

Nor is U.S. President Donald Trump's administration likely to try to ease friction between its two allies.

"The solution will be for the two governments to put their heads together," Ha Jong-moon, a professor at South Korea's Hanshin University. "It would be good for the United States to help open the door to negotiations by setting the table, but I think it would be hard to expect that of them."

(Reporting by Linda Sieg; Additional reporting by Joyce Lee in Seoul; Editing by Gerry Doyle)

By Linda Sieg

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Financials (KRW)
Sales 2019 26 007 B
EBIT 2019 3 397 B
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Yield 2019 2,01%
P/E ratio 2019 20,3x
P/E ratio 2020 12,0x
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EV / Sales2020 1 889x
Capitalization 53 626 B
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Seok-Hee Lee Chief Executive Officer & Director
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Tae-Won Chey Chairman-Executive Board
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